Contractor's Corner

HUD Announces Changes to the 90-Day Flipping Rule for FHA

The Federal Housing Administration (FHA) has announced a temporary waiver of it’s ‘90 day seasoning required for sellers rule’ for FHA insured properties effective February 1, 2010. 

So what does that mean? 

As many people know, when an investor purchases a property there has been a rule that prohibits that individual from selling (flipping) that property for 90 days.  In today’s market, properties can often be rehabilitated in less than 90 days, but the investor had to assume the carrying costs for 3 months before they could put it back on the market.  This is great news for the investors, but also for all buyers…particularly in the entry level, as it could make these homes more affordable.  This could go a long way to help help homebuyers find affordable housing and stabilizing neighborhoods.  

Here are the important facts that you need to know:

• The new purchase price for the home cannot exceed 20% of the aquistition price the investor paid for the home.  If the sale price IS 20% or more of that purchase cost, the lender must: (A) provide supporting documentation to support the improvements and/or a second appraisal and (B) order an inspection of the property and provide it to the buyer.
• It must be an arms-length transaction.  That means there can be no relationship or interest between the seller, buyer, or other parties to the transaction.  (It also means that realtors cannot sell their own listings)
• Waiver takes effect February 1, 2010 for a period of one year unless extended.

To read the specific details, go to:  http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf

If you are interested in investment property or home flipping, feel free to give me a call at 714-552-0274.  I have had my contractor’s license for 15 years and am experienced in finding homes that are great opportunities…whether you are an experienced investor, contractor, or just getting started.